Draghi Says Europe Needs Higher Powers as Leaders Quarrel

European Central Bank President Mario Draghi adjusts his paperwork ahead of a news conference to announce the bank's interest rate decision in Frankfurt, on Thursday, July 3, 2014. Photographer: Martin Leissl/Bloomberg

July 10 (Bloomberg) -- European Central Bank President
Mario Draghi said the region needs more-centralized powers to
push governments to overhaul their economies.

“There is a case for some form of common governance over
structural reforms,” Draghi said in a speech in London
yesterday. “This is because the outcome of structural reforms,
a continuously high level of productivity and competitiveness,
is not merely in a country’s own interest. It is in the interest
of the union as a whole.”

Draghi has repeatedly said the ECB’s ultra-loose monetary
policy isn’t sufficient to sustain the euro area’s fragile
recovery if governments backslide. European Union finance
ministers meeting in Brussels this week signaled a willingness
to give politicians extra leeway so long as they take measures
to fix their economies. They then clashed as Italian Prime
Minister Matteo Renzi pushed back against austerity measures.

“Historical experience, for example of the International
Monetary Fund, makes a convincing case that the discipline
imposed by supranational bodies can make it easier to frame the
debate on reforms at the national level,” Draghi said. “I
would see merits in initiating, as a one-off, a new convergence
process within the euro area -– one which ensures that all
countries are truly in a position to benefit from membership.”

ECB Executive Board member Benoit Coeure said earlier
yesterday that convergence could be complemented by action such
as a European effort to increase investment by channeling
private savings. It could culminate in the transfer of budgetary
responsibilities to the European level, he said in Athens.

“But let me add an important note of caution,” Coeure
said. “This can only occur once trust has been restored across
countries and within countries, i.e. after growth has resumed,
unemployment and inequalities have receded, and economies have
sufficiently converged. What we are talking about is a new
social contract among European countries.”